Vici Properties (VICI -0.28%) is a real estate investment trust, or REIT, that focuses on gaming properties. It owns several iconic Las Vegas Strip real estate assets, including Caesars Palace, Venetian, MGM Grand, and Mandalay Bay, just to name a few. It also has a top-notch portfolio of regional gaming assets, with 54 gaming properties operated by leading companies like Caesars Entertainment (NASDAQ: CZR), MGM Resorts (NYSE: MGM), Hard Rock, Margaritaville, and others.

Vici has a dividend yield of nearly 6% that is well covered by its cash flow and has a strong history of producing excellent total returns for investors. I believe this cash-gushing dividend stock could produce market-beating returns for many years to come.

Can VICI Properties beat the S&P 500?

Many investors think of REITs as boring income investments, but that is simply not the case -- at least not with all of them. REITs are total return investments, and in addition to their dividend income, they have several ways to produce shareholder value (a rising stock price), including:

  • Appreciation as their underlying properties go up in value.
  • Strategic acquisitions that are accretive to earnings.
  • Development of new properties for less than their as-completed value.
  • Strategically disposing of assets at a profit.
  • Using leverage (borrowed money) to increase profitability.

Vici has already done a solid job of most of these. As the rental income of its properties increases, so does their intrinsic value. Vici has made several acquisitions, including the Venetian Resort and rival REIT MGM Growth Properties, that have been accretive to FFO (funds from operations, the REIT version of "earnings") per share.

Furthermore, while development and strategic asset sales aren't a big focus, Vici owns a significant amount of undeveloped land on and around the Las Vegas Strip. Plus, instead of developing properties itself, it has been funding development for partners (essentially acting as a lender), which generates interest income and creates a future acquisition pipeline.

Vici has a major advantage when it comes to using leverage. While I wouldn't call its debt load high by any means, the stable-income nature of its properties and top-notch asset quality give it access to lower-cost borrowing than its peers can access.

Think of it this way. If Vici can borrow money at a 5.75% interest rate (it just issued new debt at this exact rate) and can make construction loans to partners at 8% or 10% interest, this can be a great way to boost its profits and take advantage of the higher-rate environment that is weighing on many other REITs.

In fact, since its 2017 spinoff from Caesars Entertainment through the end of 2023, Vici produced a 134% total return for investors -- about 26 percentage points greater than the total return of the S&P 500.

Future opportunities

Although Vici is already a massive REIT, it could still have plenty of room to grow. For one thing, its gaming portfolio has some embedded growth opportunities, such as the right of first refusal on several Caesars-owned properties in Las Vegas. Plus, with the continued trend toward legalized gambling throughout the United States, there will likely be a steady pipeline of regional opportunities.

Vici also has tremendous opportunities in other experiential properties. It recently acquired 38 Bowlero entertainment centers in its first major non-gaming transaction. It has call options on several of the properties it has financed for partners such as Cabot Resorts, Margaritaville, and others.

In short, Vici has already established an excellent track record of smart capital allocation in the roughly seven years since it spun off from Caesars, and it still has a massive opportunity ahead of it. Plus, the stock trades at an extremely attractive valuation of less than 13 times forward FFO and has a 5.8% dividend yield.

With all of the potential value-creation levers it has available, Vici Properties could continue to beat the market for years to come, especially if interest rates start to fall, creating a more favorable cost-of-capital environment for REITs.